KR
The Kroger Co.
$67.25
Stable Earnings Power
80%
P/Adj-EPS × Normalized Multiple
Strong
·
Conviction
Overvalued
Trading 42.5% above fair value
You pay
$67.25
Bear
$39.33
Fair
$47.20
Bull
$55.07
Bear
$39.33
-41.5%
$2.96 × 10x P/E
Fair
$47.20
-29.8%
$2.96 × 12x P/E
Bull
$55.07
-18.1%
$2.96 × 14x P/E
Key Value Driver
Normalized P/E multiple (12x base case)
Implied Market Multiple
22.7x
Summary
Our base-case estimate uses a valuation based on adjusted earnings per share and a normalized price-to-earnings multiple. We then blend that result with the average analyst price target of $74.45 from 44 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $47.20 per share.
Warnings
The company's reported profits differ from official accounting profits by 92%. Check what costs are being left out of the adjusted number.
The company pays out 91% of its profits as dividends. That leaves little cushion — the dividend could be cut if business slows down.
Wall Street's average price target is $74.45 (from 44 analysts). Our estimate is 52% below the consensus -- consider that gap carefully.
Key Risks
- Growth DCF inappropriate — terminal value assumptions dominate
- EV/EBITDA misleading for regulated businesses where capex is mandated
- Regulatory risk is a fat tail not visible in normal multiples